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We estimate the short run effects of Brexit border disruption on the UK economy. We estimate a structural VAR for the UK, where Brexit effects are identified by the dates of Brexit events, the referendum, and the exit from the single market. We find evidence of short run effects of Brexit: temporary effects on GDP, exports and imports (slightly negative), and on inflation and interest rates (slightly positive). These effects are consistent with modest disruption from introducing a border with the EU--a border due to be made barrier-free and seamless by the UK-EU Trade and Cooperation Agreement. Previous work using other countries as comparators is vulnerable to identification difficulties. We also survey earlier modeling work on the long run effects of evolving policies of free trade, UK-sourced regulation, and liberalized immigration. Models of long run trade suggest the emergence of substantial gains. [ABSTRACT FROM AUTHOR]

This paper quantitatively investigated the historical transition of return transmission, volatility spillovers, and correlations between the US, UK, and Japanese stock markets. Applying a vector autoregressive (VAR)-dynamic conditional correlation (DCC)-multivariate exponential generalized autoregressive conditional heteroscedasticity (MEGARCH) model, we derived new evidence for four historical periods between 1984 and 2024. First, we found that the return transmission from the US to the other markets has historically become stronger, whereas recently, the return transmission from the UK to the US has disappeared. Second, we clarified that volatility spillovers from the US to the other markets have historically become stronger, whereas recently, volatility spillovers from the UK to the US have also disappeared. Third, our analyses of the historical constant correlations and DCCs revealed that stock market connectedness has gradually tightened between the US and Japan and between the UK and Japan, whereas recently, the connectedness between the US and UK has weakened. Fourth, our VAR-DCC analyses also revealed that volatility spillovers between the US, UK, and Japanese stock markets have been asymmetric. Fifth, we further showed that the skew- t errors incorporated into our VAR-DCC model are effective in estimating the dynamic stock return linkages between the US, the UK, and Japan. Finally, based on our findings, we derived many significant and beneficial interpretations and implications for historically and deeply considering return transmission, volatility spillovers, and DCCs between international stock markets. [ABSTRACT FROM AUTHOR]

Purpose: In this paper, the authors investigate whether coronavirus disease 2019 (COVID-19) impacts household finances, like household debt repayments in the UK. Design/methodology/approach: This paper employs a vector autoregressive (VAR) model that nests neural networks and uses Mixed Data Sampling (MIDAS) techniques. The authors use data information related to COVID-19, financial markets and household finances. Findings: The authors' results show that household debt repayments' response to the first principal component of COVID-19 shocks is negative, albeit of low magnitude. However, when the authors employ specific COVID-19-related data like vaccines and tests the responses are positive, insinuating the underlying dynamic complexities. Overall, confirmed deaths and hospitalisations negatively affect household debt repayments. The authors also report low persistence in household debt repayments. Generalised impulse response functions (IRFs) confirm the main results. As draconian measures, the lockdowns are eased and the COVID-19 shocks are diminishing, and household financial data converge to the levels prior to the pandemic albeit with some lags. Originality/value: To the best of the authors' knowledge, this is the first study that examines the impact of the pandemic on household debt repayments. The authors' findings show that policy response in the future should prioritise innovation of new vaccines and testing. [ABSTRACT FROM AUTHOR]

Purpose: The literature mostly investigates the business cycle transmission of the United Kingdom (UK) and France as a part of a wider group (e.g. European Exchange Rate Mechanism or G7), despite their historical links and regional significance. Thus, herein paper aims to analyse the inter-dependence of these economies and how a shock from one of them affects the other for the data since 1978 to 2019. Design/methodology/approach: In this paper, first, preliminary statistics were calculated in order to describe the historical relationship between these countries. The econometric part estimates the vector auto-regression model (VAR) to assess the inter-dependence of the economies. VAR model allows further to inspect the impulse response functions that shows the shock dynamics from one country to another. In order to verify if a shock from one of the economies is important to another, the study uses granger causality test. Findings: The study establishes a strong link between these countries. A business cycle is transmitted significantly between the economies of France and UK, with a single standard deviation shock from France resulting in a long term effect of 0.4% change in gross domestic product (GDP) of UK and 1% vice versa. Additionally changes in GDP of both of the countries significantly Granger-cause change to GDP of the corresponding economy. Originality/value: This is the first empirical study investigating the business cycle transmission between France and UK and providing a quantitative assessment of their inter-dependence. [ABSTRACT FROM AUTHOR]

Using the factor-augmented vector autoregressive (FAVAR) model proposed by Bernanke et al. (2005), this study explores the effect of monetary policy on a wide range of macroeconomic and financial variables for the US, Canada and the UK. The study makes use of financial data from 1990 to 2016, comprising 55-70 variables of the three major nations to show (1) that factors come with additional informational capability, which summarizes the performance of key macroeconomic variables and (2) the manner in which these variables are affected by contractionary monetary policies. Our findings confirm that monetary policy tightening results in decrease in industrial production, employment, share prices, housing starts and inflation; however, it leads to increase in the three-month treasury bill rate, long-term interest rates and unemployment. Overall, the impact of standardized monetary tightening is similar across the countries studied. These results from the major economies and the inclusion of larger data sets containing more variables would be relevant for policy theorists and practitioners from other countries. [ABSTRACT FROM AUTHOR]

This paper examines the dynamic relationship between interest rates, inflation and economic growth using a long dataset for the UK. The approach adopted enables us to identify structural breaks in the dynamic system (vector autoregression (VAR)). We find interest rates respond much more strongly to growth and inflation over recent decades, and forecast error variance decomposition analysis indicates there is increasing interconnectedness between the variables in recent years. Economic policymakers need to carefully monitor the linkages between these variables and be prepared to adjust their monetary policy tools when faced with structural changes. [ABSTRACT FROM AUTHOR]

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In this paper we test for the inclusion of the bid–ask spread in the consumption CAPM, in the UK stock market over the time period of 1980–2000. Two econometric models are used: first, Fisher’s (in J Appl Econometrics 9:S71–S94, 1994) asset pricing model is estimated by GMM. We obtain plausible values of all the structural parameters and transactions costs. We subsequently test the robustness of our results by extending the VAR approach proposed by Campbell and Shiller (in Rev Financ Stud 1:195–228, 1988). This is achieved with the inclusion of the normalised bid–ask spread as an independent variable in the pricing equation. Overall, the statistical tests are unable to reject the bid–ask spread as an independent explanatory variable in the C-CAPM. In addition, in the VAR specification we find that both the normalised and the absolute bid–ask spread is a significant predictor of the dividend to price ratio. The paper’s main conclusion is that transaction costs should be included in asset pricing models, as they possess independent explanatory power. [ABSTRACT FROM AUTHOR]

The well known fact that investment trusts (closed-end mutual funds in the USA) trade at a discount means that the return to an investor depends not only on the change in net asset value (NAV), but also on changes in the discount over the holding period. Using daily data, this paper models the relationship between UK investment trust prices and NAV's using cointegration methodology then shows that the forecasts based on the, error correction mechanism (ECM) compare poorly with those from vector autoregressions. And then incorporates a number of modifications to the ECM in an attempt to improve the forecasts. In particular, modelling volatility persistance and allow for asymmetric resonses in the ECM. [ABSTRACT FROM AUTHOR]